The Best Of Both Worlds
McDonald’s, Häagen-Dazs, Hilton Hotels, 7-Eleven … these are global franchise brands that immediately bring to mind business success. In South Africa, brands such as Nando’s, Spar and Sorbet are instantly recognisable, and bring with them an expectation of quality, consistency and good customer service. For women with a bit of business acumen and access to startup finance, this brand awareness and quality conviction offer franchising’s most appealing business proposition. “If you invest in a franchise that is a brand leader in its category, you are buying into a good recipe for success,” says Vera Valasis, executive director of the Franchise Association of South Africa (FASA). “It is very difficult to emulate this in your own business. Brand values that have been built up over many years are invaluable, and provide the franchisee with peace of mind and, hopefully, a good return on investment.”
WHAT YOU’RE BUYING INTO
While a franchisee essentially runs her own business, it is still a business that is underpinned by the requirements of the franchise relationship. This can be extremely beneficial for her, as she makes use of supplied marketing material, established supply chains and the support of a head office with extensive experience in the business model. But for some personality types, these factors can feel a little constraining.
“Franchising is not for free-spirited entrepreneurs, as they can find having to follow and implement someone else’s business model very restrictive,” says Valasis.
Franchises also don’t come cheap. All that brand recognition and support comes at a price, so prospective franchisees should have ready access to finance, and expect to pay ongoing royalty fees to the franchisor. “In order for you to trade under their umbrella, you will have to agree to pay a certain amount in royalty fees to the franchisor. This is an ongoing arrangement for as long as you are using the franchisor’s brand,” says Simone Cooper, head of franchising and enterprise development at Standard Bank.
FUNDING A FRANCHISE
On the upside, it is easier to obtain finance for franchises, as banks are also influenced by the power of an established brand and business model. “Banks do consider the track record of the franchise brand in the assessment process, as well as the support and training provided by the franchisor,” says Cooper. “Franchise operations, where this support is evident and effective, are more likely to succeed.”
Given that franchising requires a considerable upfront commitment from the franchisee, the barriers to entry for owning a franchise were historically quite high. However, earlier this year a fund was started by Business Partners Limited, backed by the Development Bank of Southern Africa, to stimulate job creation and support entrepreneurial spirit. The purpose of the fund is to “provide affordable franchising opportunities to those who would otherwise not have had the opportunity to acquire a business”. This is good news for a large segment of the South African job-seeking market as, despite some of the more onerous requirements of franchising, it still offers a significant leg up into the world of business ownership.
JENNY REID: THE BEST OF BOTH WORLDS
Businesses that sell services sometimes expand by offering a licence, rather than a franchise. This businesswoman explains how her startup business offers services all around the country through its licence model.
In 2009, Jenny Reid had a dream. She wanted to own a business that she could run from the beach in Mauritius. Five years later, she runs an online business available for licensing, and she could be on that beach – in theory.
In 1995, Reid accepted a position as a corporate PA in an investigations company. In 2001, that company decided to launch a separate screening business. Because of her passion and energy, Reid was appointed as MD and given a 50% shareholding in the new business. That business grew and developed and, in September 2009, she took over 100% ownership of iFacts.
“We’ve grown from being a tiny business into a company with a full risk management programme offering services internationally,” she says. “Although we currently run checks only on South African candidates, South Africans are being hired all over the world – for instance by the oil industry in Saudi Arabia – so we verify them for international clients.”
Today, iFacts carries out criminal checks, qualification and experience verifications, and other assessments that make sure a candidate is who he says he is. Clients engage with the business online, and agents contact the relevant bodies for verification. The company has sold six licences around South Africa and has now expanded into the rest of Africa, with one licence in Nigeria and another three being considered in Kenya, Zimbabwe and Zambia.
Reid projects that licence-holders will cover their costs and make a 25% profit in their first year of business. The woman who now heads up a company that is selling multiple businesses started out with secretarial skills and a PR qualification. She spent time in her early career at various large corporates, but found the work and the environment unsatisfying. “I would question why things were being done in a certain way,” she says. “I guess an entrepreneurial spirit doesn’t go down too well in large corporations.”
The obvious solution was for her to run her own business, and when that opportunity presented itself in the form of iFacts, she leapt at the chance – even going as far as investing her pension in the new business. “I knew it was going to be fine. There was never a question of not making it work. I had to make it work.”
Reid laughs when she thinks of her 2009 dream. “If I wanted to work from a beach, running an online business was the way to go. Right now I’m not looking at the sea in Mauritius – but I could be.”
THE iFACTS LICENCE
Start of company: 2001 Number of licences: 7 Cost: R80 000 for a South African licence and US$10 000 for an African destination outside South Africa Ongoing costs: 12% of the current purchase price Website: www.ifacts.co.za.
MELODY TOMLINSON: BUILDING BUSINESSES A CALLING
This entrepreneur found her calling helping other people to build their businesses. Then she created a licensed coaching product to allow her to do just that.
“I was a nobody from nowhere with a job that no one knows anything about, trying to create a demand for something that there was no demand for.” This is how Melody Tomlinson describes trying to start up a life coaching business in Nelspruit – a town that she describes as “10 years behind Johannesburg, which is 10 years behind the rest of the world”.
Coaching had always been in Tomlinson’s blood. She just didn’t know what it was called. After she’d studied and travelled, she opened her own business selling curios, which she ran for the next 13 years. During that time, she helped many of her friends to establish their small businesses, assisting them with both startup ideas and emotional and technical support. This, she felt, was her true calling, and she tried to think of ways to turn this into a career.
Then, in 2006, she watched a three-day Oprah special that featured life coaches such as Dr John Demartini and Kate Emmerson. “I was mortified that they’d had the idea of life coaching before me,” she says. But her distress lit a fire under her, and she immediately enrolled in a life coaching course herself.
Three years on, she’d built a customer base for herself in Nelspruit and overcome a sincere fear of speaking in public. “It was one of the best things I could have done for myself,”
she says. “Now I don’t believe that people’s limitations should stand in the way of them overcoming their fears.”
Around the same time, she married a man with a similar interest in people development, who had created a personal leadership and management programme called Performance Booster. He suggested that she take over the programme. “But I am strong and assertive and wanted to establish my own brand,” she says.
Then, on a business trip with her husband, she had a revelation. “The Performance Booster is perfect for life coaches!” She branded the programme, registered it and started developing licences. Those who buy the licence can then carry out the Performance Booster training at corporate clients to increase staff emotional intelligence, confidence, productivity and time management. Tomlinson is doing exactly what she always wanted to do.
“Being a licensor means that I get to help other people grow their business. This is similar to coaching, except that I have a greater interest in their success, as their success leads to our business success,” she says. “I’ve been involved in this for almost three years, and the most amazing thing is waking up every day and knowing I will make a difference in someone’s life.”
THE PERFORMANCE BOOSTER PROGRAM
Start of company: Officially registered as a business with licences available in July 2012 Number of licences sold: 5 Cost of buying into the franchise: R65 000 for individuals and schools. Corporate licences from R80 000 to R200 000, depending on the size and package
Ongoing costs: Each delegate trained requires a Performance Booster file and behavioural profile, at R500 per delegate, and must be ordered from the company. There is a 10% annual licence renewal fee. Website: www.performancebooster.co.za
BELINDA BRADLEY: WEARING MANY FRANCHISING HATS
From franchisee to franchisor, trainer, quality controller and operations expert – this woman has worked in every possible aspect of the franchising business.
Belinda Bradley is the franchisor for VIP Bin Cleaning in South Africa; she owns a small consultancy firm called Focus on Franchising; and she is a director at SA Franchise Warehouse. It’s safe to say that Bradley believes in franchising.
She grew up in Amanzimtoti and did well at school, but couldn’t afford to go to university. Instead, she found a job as a quality controller at Chicken Licken. She rose up through the ranks, eventually running the whole KZN region for the brand. She then accepted a position at O’Hagans Franchise Marketing, to get a sense of how the numbers behind a number of franchises worked.
Unfortunately, the numbers didn’t quite add up, and O’Hagans went under. But Bradley was contacted by Kobus Oosthuizen, the CEO of Franchise Warehouse, who wanted to implement his IT system for running operations in the franchise Butterfield Breads. Bradley took this on, and ultimately got involved in training and operations at the franchise.
Oosthuizen moved on in 2006 and started a consultancy firm to support franchisers. Bradley joined him to develop training material and operational manuals. But she was then approached by a West African food corporation to establish a brand and supply chain in South Africa.
Bradley spent three years setting it up, but then the recession hit and the holding company felt it wasn’t possible to get a fledgling brand through the tough economic times, and withdrew from South Africa.
“I decided to see what I could do with the talents I’d picked up along the way. I started working with individual franchising companies to develop their operations manuals and training material, and that’s how I got started in the consulting space.” Then Oosthuizen got in touch to ask for her help in developing a workshop to educate people about franchising. At the same time, she realised that there was an opportunity to help people to access grant funding to start franchises through the Franchise Warehouse. And then, as if all of this wasn’t keeping her busy enough, she was approached by a global franchise called VIP Bin Cleaning, which cleans everything from residential bins to industrial containers with environmentally friendly products.
She liked the people and the integrity of the business, so she took over a 40% share and started franchising it locally. She believes she’s a better franchisor than a franchisee. “I have the bug of wanting to create something, to model it,” she says. “Having had the opportunity to step up to the plate, I could never go back to earning a salary.”
She says that helping people to create their own destinies is the most rewarding thing she’s ever experienced. “I can create hope for people – help them to build their futures outside of relying on a job, and that’s what keeps me going. I don’t think I could ever let go.”
THE VIP BIN CLEANING FRANCHISE
Start of franchise: Relaunched in South Africa in 2013 Number of franchises: 8 Cost of buying into the franchise: R215 000 + VAT, plus a towing vehicle
Ongoing costs: Monthly management services fee, 6% of monthly sales/turnover Website: www.vipbincleaning.co.za
ZANELE MVELASE: FROM FINANCE TO FRANCHISE
Two McDonald’s franchisees left the corporate world of banking to pursue a more balanced life as business owners.
Women in business often say it’s lonely at the top, which is why it’s so important to help other women get up there with you. This thinking clearly drives Victoria Moya. When she had completed her required nine months of franchise training and was ready to attend McDonald’s “Hamburger University” in the United States, she hoped that a female colleague would go with her.
“I heard that there was another lady in training, but she wasn’t close to completing it yet,” Moya says.
Undeterred, she tracked down the other woman, Zanele Mvelase, and dragged her through what was left of her training in record time so they could travel to Hamburger University together.
These women have a lot in common; they are both highly qualified businesswomen who have served as executives in financial institutions. After owning various franchises when she was younger, Moya held executive positions at two of South Africa’s leading banks. She frequently travelled to the United States and United Kingdom, and during these visits, she found the food was so unfamiliar and expensive that she was drawn to the local McDonald’s branches. She was impressed by the power of this global brand, and her entrepreneurial spirit was reawakened.
“When I got back to South Africa, I started researching how to prepare to become a McDonald’s franchisee. I knew that I had to get myself into a state of preparedness so that if the opportunity came, I was ready to take it.”
Mvelase had also been working as an executive in the world of finance, but felt she needed to take a few months’ break. She had been at home for two weeks when she realised that the important things in life had been passing her by.
“For the first time, I was savouring the pleasure of seeing my children off to school, picking them up, helping with their homework, and spending quality time with my husband, which had been very rare in my corporate days.” She says she also got to spend time with herself, reflecting on her life – her achievements and past mistakes that led her to define, in her own terms, what she wanted her life to be. “It was at this point that I realised that corporate was no longer the place for me.” She started looking around for opportunities, and was drawn to McDonald’s because the brand sophistication resonated with her. After Mvelase and Moya completed the McDonald’s training programme, they both looked forward to the opportunity to open their first branches. When an offer came up for a McDonald’s branch on the KwaZulu-Natal South Coast, Moya leapt at the chance, packed up her life and her young daughter, and headed for the coast.
A few months later, Mvelase took up the offer to take over the store at Hartbeespoort Dam. One of her greatest learnings on the franchising journey has been getting to know and work with the McDonald’s staff, which began with her training. “During my training, I chose to operate as part of the crew and not as an operator in training. This allowed me to interact with people I would normally not have worked with, and experience life at a different level. It was a humbling experience, and this is why I think I understand and have a better relationship with my team, both managers and crew. It changed me.”
Moya and Mvelase are still helping women to make it. “I’ve always appointed women managers and trained them, and I do the same in McDonald’s. Of course I give males a fair chance, but I pay special attention to empowering women – and they’re stunning and are doing amazing jobs,” says Moya.
Mvelase says she always enjoyed working with people at the bank, and owning McDonald’s franchises gives her the opportunity to keep doing this – and especially to uplift women.
“In my previous job, all of my direct managers were females, and currently my management team consists of 77% women. I find that women are more responsive to my expectations and empathetic to my customers, especially the important customers, who are children. I generally find that women are doers, and given the right attention and mentorship, they can conquer the world.”
Both women’s dedication and energy have paid off; they now both have a second McDonald’s store in their respective areas and are on the lookout for further opportunities. They have both taken a pay cut to pursue their franchising dream, and know that to achieve success, they need to run a franchising empire. While running two businesses and still on the lookout for more may not seem the easiest way to pursue balance, these two women are adamant that McDonald’s has tipped the scales in their favour.
THE MCDONALD’S FRANCHISE
Start of franchise in South Africa: November 1995 Number of franchises: 104 Cost: Actual costs are determined only when an individual franchise is offered to an applicant, and varies from R4 million to R6 million, depending on the type of restaurant and other factors
Ongoing costs: General operational fees, rent, royalties and marketing Website: www.mcdonalds.co.za/franchising
SHIVANI RAMNARAIN : SORBET SERVES UP A LIFE-LONG DREAM
Investing in a franchise requires a big financial commitment upfront. This franchisee waited 12 years until she was able to put the cash on the table.
Shivani Ramnarain often sits in the parking lot of the Centurion Lifestyle Centre, staring at her Sorbet store. “I just look, and think to myself, ‘this is mine’,” she says.
Opening this branch of beauty therapy chain Sorbet was the realisation of a 12-year-long dream. “I’d been a client for years. Everything about it attracted me – the professionalism, the services, the products they use, the branding.”
She and her husband spent those 12 years raising the finance to buy into the franchise. Ramnarain worked in various jobs, including spending two years at one of South Africa’s leading investment banks and opening her own catering business, while also doing nail and make-up courses.
Then, in 2013, after the birth of her daughter, she reached her goal. “We had the cash; now it was serious.”
She applied to Sorbet and was approved as a franchisee. It was now up to her to find her store’s location. “My husband and I spent months stalking different shopping malls. Every Saturday and Sunday we spent eight hours in the car with a picnic and our daughter in the back, counting feet and looking at the type of market.”
They soon realised that Johannesburg was saturated with nail and beauty salons, so they started looking at Centurion, where there was only one existing Sorbet branch. After careful research and assessment, Ramnarain settled on the Centurion Lifestyle Centre. She threw open the doors on 2 October 2013. “It was amazing,” she says. “I was shaking. I couldn’t believe my dream had come true.” With the support of her husband, Ramnarain continued to apply sound business principles to her franchising strategy.
“We knew that to make money, we needed to have more than one store,” she says.
Eight months later the Sorbet in the Centurion Mall came up for sale. On 1 June 2014, Ramnarain took ownership of her second Sorbet branch. “It’s 5km away from my first store, so it’s easy to divide my time between the two, and the market in the area is mine.” She confesses that there are not enough hours in the day, and she struggles to find the balance between her commitment to her professional baby and her real baby at home. “I’ve had to learn to let go a little and hire more staff,” she says.
But nothing’s slowing down this businesswoman. She’s eyeing out some of Sorbet’s other franchises – Candy & Co, an ethnic hair salon, and the Dry Bar, which offers affordable blow-dries in a relaxed environment. For her, the winning ingredient for business success is passion. “You live and breathe your business; with passion, everything just falls into place.”
THE SORBET FRANCHISE
Start of franchise: 2005, with the first store franchised in 2009 Number of franchises: 98 Cost: An estimated R1.1 million to R1.2 million for an 80m2 salon Ongoing costs: Management fees at 6% of turnover; operational costs and rentals vary per store
USEFUL FRANCHISING CONTACTS
The Franchise Association of Southern Africa (FASA): The only recognised representative body for the franchise industry in South Africa. www.fasa.co.za. 0861-2FRANCHISE (0861- 2372624473)
SA Franchise Warehouse: A South African franchise directory where you can find relevant information about franchise systems in South Africa. www.safranchisewarehouse.co.za 012 460 2345.
Business Partners Limited: A specialist risk finance company that supports entrepreneurial growth and provides financing for small and medium businesses. www.businesspartners.co.za. 011 713 6600.
Whichfranchise: A website for franchise information, advice and opportunities in South Africa. www.whichfranchise.co.za. 011 454 2235.